Poll: Who's going to try to get ACA subsidies by staying under the threshold?

[gerrym51]

I estimate my income at 200% FPL and receive the appropriate subsidy and low deductible plan. I am a heavy user. At year end I get those unintended, unknown Cap Gain distributions. Oh, golly, I owe the difference between the 350% FPL and 200% FPL premiums. But do I get to keep the savings of being on a low deductible, low copay plan? I don't see how they will deal with this, although anything is possible.

i think they make adjustmants in the following years' tax form

 

[pb4uski]

I estimate my income at 200% FPL and receive the appropriate subsidy and low deductible plan. I am a heavy user. At year end I get those unintended, unknown Cap Gain distributions. Oh, golly, I owe the difference between the 350% FPL and 200% FPL premiums. But do I get to keep the savings of being on a low deductible, low copay plan? I don't see how they will deal with this, although anything is possible.

In the tax form for the year in question you would need to pay back to the government the excess of the subsidies you received (based on 200% FPL) and the subsidies you deserved (based on 350% FPL). So if this happened in 2014, the payment would accompany your 2014 tax return filed in 2015.

 

[Z3Dreamer]

But what about the difference in co-pays and deductibles? Your responses to my question were only addressing the subsidy, but those with higher subsidies also receive less out of pocket. This cannot possibly be addressed on a tax return. Only the subsidy can be addressed.

 

[Z3Dreamer]

From the "Covered California" chart, a couple at 400% FPL should pay roughly $6,000 net ($491 times 12). 200% is about $2,000 ($163 times 12). So if I underestimate my income I must pay $4,000 on my tax return. Lets say that during the year, I had so much in claims that I hit the Maximum OOP of $4,500. I should have had a Maximum OOP of $12,800. How does that get refunded. The government already collected their subsidy overpayment from me at tax time. Do I get to keep that extra $8,300?

 

[MichaelB]

But what about the difference in co-pays and deductibles? Your responses to my question were only addressing the subsidy, but those with higher subsidies also receive less out of pocket. This cannot possibly be addressed on a tax return. Only the subsidy can be addressed.

The only thing that is reconciled is the premium / subsidy you are expected to pay. Everything else is included.

 

[gerrym51]

From the "Covered California" chart, a couple at 400% FPL should pay roughly $6,000 net ($491 times 12). 200% is about $2,000 ($163 times 12). So if I underestimate my income I must pay $4,000 on my tax return. Lets say that during the year, I had so much in claims that I hit the Maximum OOP of $4,500. I should have had a Maximum OOP of $12,800. How does that get refunded. The government already collected their subsidy overpayment from me at tax time. Do I get to keep that extra $8,300?

is it possible to say-I don't know-.
as far as i know the federal government uses the irs for premiums and thats all you have to worry about(i think).

 

[Z3Dreamer]

Are you saying underestimating income is a possible loophole? Of course fraud is bad but not knowing how much that Cap gain distribution is going to be is not fraud.

 

[pb4uski]

From the "Covered California" chart, a couple at 400% FPL should pay roughly $6,000 net ($491 times 12). 200% is about $2,000 ($163 times 12). So if I underestimate my income I must pay $4,000 on my tax return. Lets say that during the year, I had so much in claims that I hit the Maximum OOP of $4,500. I should have had a Maximum OOP of $12,800. How does that get refunded. The government already collected their subsidy overpayment from me at tax time. Do I get to keep that extra $8,300?

From a ACA perspective, subsidies have nothing to do with co-pays. Copays are a function of the policy you have and what your incurred medical costs are. The OOPM has nothing to do with premiums or subsidies.

I don't understand that you "should have had" a OOPM of $12,800 since OOPMs don't vary based on income - perhaps it is something unique to CA.

 

[Z3Dreamer]

There are two prongs to the exchange plans: 1) Monthly premiums net of subsidy and 2) maximum out of pocket. You need to look at Covered CA. I used Couples. Annual income up to $31,020 has a premium of $163, but also a maximum out of pocket of $4,500. Annual income up to $62,040 is $491, but has a maximum out of pocket of $12,800. Read the Covered CA and then walk through my earlier example.

 

[gerrym51]

From a ACA perspective, subsidies have nothing to do with co-pays. Copays are a function of the policy you have and what your incurred medical costs are. The OOPM has nothing to do with premiums or subsidies.

I don't understand that you "should have had" a OOPM of $12,800 since OOPMs don't vary based on income - perhaps it is something unique to CA.

i have looked deeply into obamacare-yesterday i also looked into CT. by reading i found out that indeed under obamacare out of pocket max on a plan is 6400 single 12,800 family.

i also found out that premium reduction and out of pocket subsidies are part of obamacare. however the only part that has to do with the irs tax form is the premium subsidy.

when you apply for premium subsidy at the exchange it will take all your info and decide whether you qualify for medicaid-if you qualify for medicaid you have to be in medicaid. if you are in any of the other levels it assigns you as being eligible for it gives you both the premium subsidy and the out of pocket subsidies if you are eligible for them.

however in all my searching i have found no mention of reimbursing the government out of pocket subsidys-just premium subsidies

 

[MichaelB]

There are two prongs to the exchange plans: 1) Monthly premiums net of subsidy and 2) maximum out of pocket. You need to look at Covered CA. I used Couples. Annual income up to $31,020 has a premium of $163, but also a maximum out of pocket of $4,500. Annual income up to $62,040 is $491, but has a maximum out of pocket of $12,800. Read the Covered CA and then walk through my earlier example.

Nothing to walk through. You are responsible for the premium subsidy, and it will be reconciled when you file your tax return. There is no after the fact reconciliation of actual policy use.

 

[Z3Dreamer]

Totally different issue about ACA. There are many FIRE who will be on COBRA at the end of 2013. I read something from Kaiser Family Foundation stating that it is unclear whether those who are on COBRA qualify for subsidies. They may have to wait out the 18 months. They point to something in the regs that gives them this hint. If Kaiser is unclear, what do you think?

 

[gerrym51]

Totally different issue about ACA. There are many FIRE who will be on COBRA at the end of 2013. I read something from Kaiser Family Foundation stating that it is unclear whether those who are on COBRA qualify for subsidies. They may have to wait out the 18 months. They point to something in the regs that gives them this hint. If Kaiser is unclear, what do you think?

cobra lasts a maximum of 18 months. there is no rule that says you have to stay in it for the full 18 months. you can buy other insurance at any time.


drop it and buy a plan assume all exhanges will work similiarly. in mass if you are on cobra you can drop it and buy an exchange plan.

if you are really serious about buying a plan in your state sign up for one in oct. and stop paying the cobra premiums. for january open enrollment periods mean you only have to prove address and income.

when you are out of open enrollment periods is when you have to show additionnal info

 

[Z3Dreamer]

http://laborcenter.berkeley.edu/healthcare/Promise_CareAct11.pdf

I was wrong. I said it was Kaiser. It is really the Berkeley Labor Center that thinks that those who elect COBRA are not eligible for the exchanges. Please read page 16 of the attached link. The key phrase is: "If an individual chooses COBRA, the proposed regulations seem to indicate that the individual may not be able to enroll in the exchange until the exhaustion of the COBRA period."
So my concern is that someone who elects COBRA in late 2013 may be prevented from entering the exchanges until early 2015.

 

[gerrym51]

http://laborcenter.berkeley.edu/healthcare/Promise_CareAct11.pdf

I was wrong. I said it was Kaiser. It is really the Berkeley Labor Center that thinks that those who elect COBRA are not eligible for the exchanges. Please read page 16 of the attached link. The key phrase is: "If an individual chooses COBRA, the proposed regulations seem to indicate that the individual may not be able to enroll in the exchange until the exhaustion of the COBRA period."
So my concern is that someone who elects COBRA in late 2013 may be prevented from entering the exchanges until early 2015.

this was written in october 2011-it also implied by the words"seemed to indicate" that it was the authors interpretation as opposed to an outright words from HHS.

many of the rules were actually set to be written and interpreted later on. I would look for something newer on the subject.


this seems to interpret differently

http://bclsystems.net/ppaca-and-cobra/

 

[pb4uski]

i have looked deeply into obamacare-yesterday i also looked into CT. by reading i found out that indeed under obamacare out of pocket max on a plan is 6400 single 12,800 family.

i also found out that premium reduction and out of pocket subsidies are part of obamacare. however the only part that has to do with the irs tax form is the premium subsidy.

when you apply for premium subsidy at the exchange it will take all your info and decide whether you qualify for medicaid-if you qualify for medicaid you have to be in medicaid. if you are in any of the other levels it assigns you as being eligible for it gives you both the premium subsidy and the out of pocket subsidies if you are eligible for them.

however in all my searching i have found no mention of reimbursing the government out of pocket subsidys-just premium subsidies

Interesting that I can find occasional references to Obamacare helping low and middle income people with out of pocket costs that I can't seem to find anything that describes how these alleged out-of-pocket expense subsidies would work.

But isn't it all a bit moot anyway since the 6,400/12,800 OOPMs you mention above are higher than the OOPM for most policy designs that I have seen so as a practical reality no one would ever exceed the 6,400/12,800 because the insurer would be responsible for all medical costs in excess of the policy OOPM.

I wonder if they though they were being clever by claiming an OOP expense subsidy that they knew would never come into play.

 

[MichaelB]

Interesting that I can find occasional references to Obamacare helping low and middle income people with out of pocket costs that I can't seem to find anything that describes how these alleged out-of-pocket expense subsidies would work.

But isn't it all a bit moot anyway since the 6,400/12,800 OOPMs you mention above are higher than the OOPM for most policy designs that I have seen so as a practical reality no one would ever exceed the 6,400/12,800 because the insurer would be responsible for all medical costs in excess of the policy OOPM.

I wonder if they though they were being clever by claiming an OOP expense subsidy that they knew would never come into play.

This should help http://www.kff.org/healthreform/upload/7962-02.pdf
Cost sharing for lower income policyholders is delivered by moving them into policies with higher actuarial value.

 

[clifp]

Michael I am curious if you or anybody know if the subsidies are the same no matter where you live or vary based on the federal poverty levels in your area.

The reason I ask is year or so when I first started researching the subject, the calculators where using a FPL based on where you lived. Since I was in Hawaii the numbers were much higher and it was much easier to keep my income at below 400% of Hawaii's FPL.

But now the subsidies kick in a much lower level.

 

[pb4uski]

This should help http://www.kff.org/healthreform/upload/7962-02.pdf
Cost sharing for lower income policyholders is delivered by moving them into policies with higher actuarial value.

Thanks. I think I get it now. Essentially they are eligible for subsidies for plans with higher AV (and lower deductibles, co-insurance and OOPMs) so the medical cost subsidy is more indirect than direct.

So to get back to the post that started this part of the discussion, I suppose that if someone qualifies for one of these richer policies and their income ends up being higher, and at a level that they shouldn't have the richer policy that there is no clawback other than the clawback implicit in the premium reconciliation process.

 

[MichaelB]

Michael I am curious if you or anybody know if the subsidies are the same no matter where you live or vary based on the federal poverty levels in your area.

The reason I ask is year or so when I first started researching the subject, the calculators where using a FPL based on where you lived. Since I was in Hawaii the numbers were much higher and it was much easier to keep my income at below 400% of Hawaii's FPL.

But now the subsidies kick in a much lower level.

My understanding:

The subsidy is the product of subtracting the expected contribution from the premium. The expected contribution is the same everywhere, and is based on the single federal poverty level. The premiums vary as the country is separated into "cost regions": low, average and high, the delta being high = 1.5 x low. So, in a high cost area the expected contribution will be constant, the premium higher, and therefore the subsidy higher.

I have searched but found nothing so far that indicates which regions are high or low. It appears the insurance companies will determine this and we will probably find out in the exchange.

 

[CH]

Thanks. I think I get it now. Essentially they are eligible for subsidies for plans with higher AV (and lower deductibles, co-insurance and OOPMs) so the medical cost subsidy is more indirect than direct.

So to get back to the post that started this part of the discussion, I suppose that if someone qualifies for one of these richer policies and their income ends up being higher, and at a level that they shouldn't have the richer policy that there is no clawback other than the clawback implicit in the premium reconciliation process.

I wonder how hard it will be go get into one of these higher AV plans that have high cost sharing subsidies. If you are earning a good income one year, and retire the next year with $10K taxable income, will they let you in?

 

[gerrym51]

I wonder how hard it will be go get into one of these higher AV plans that have high cost sharing subsidies. If you are earning a good income one year, and retire the next year with $10K taxable income, will they let you in?

theoretically they are. although they will look at 2012 return for 2014
they are supposed to be able to electronically check current status-it might work-new systems though always have glitches

 

[Corporate ORphan]

I apoligize if this has already been covered but where does the interest on I Bonds fit in the MAGI calculation for the subsidy? Is it included as income if you just reinvest it into the bond? Anyone know what the cutoff in MAGI for a subsidy will be for a household of two?

Thanks!

 

[ziggy29]

I apoligize if this has already been covered but where does the interest on I Bonds fit in the MAGI calculation for the subsidy? Is it included as income if you just reinvest it into the bond? Anyone know what the cutoff in MAGI for a subsidy will be for a household of two?

Savings bond interest can be accounted for in two different ways. While you can claim the interest as taxable over the life of the bond (i.e. a little interest income every year), the vast majority of people just claim all the interest in the year the bond is redeemed. Either way is allowed, but you have to be consistent over the life of each bond (i.e. you can't switch from one to the other for any given bond).

So if you have $10K in bonds that you redeem for (say) $22K, that $12K hits your MAGI in the year you redeem the bond, and not at all before then.

That said, it's possible that the need to stay under 400% of FPL might change the usual strategy of deferring taxes as a large windfall declared in a single year could kick you over that threshold.

 

[Live And Learn]

Anyone know what the cutoff in MAGI for a subsidy will be for a household of two?

Thanks!

National Health Care Calculator

Lots of discussion in other threads on the subsidy that you might want to do a search for.